Employment: Saudisation challenges and opportunities
Anas A. Akel of Hourani & Partners talks about specific Saudisation challenges and opportunities in the manufacturing sector.
Saudi Arabia’s Vision 2030 aims to reduce the country’s dependency on oil and transform it into a thriving economy. A key objective of Vision 2030 is the creation of jobs and development of skills for Saudi nationals which is a natural continuation of the country’s nationalisation or Saudisation programme. As is the case globally, in Saudi the manufacturing sector is a major contributor to economic growth and job creation. In Saudi, manufacturing is also a key component in its diversification of the economy and will play a vital role in achieving Vision 2030’s objectives, particularly the local development of innovative technology. For example in May 2022, US electric vehicle manufacturer Lucid, announced it was setting up a manufacturing facility capable of producing 155,000 vehicles a year in Saudi which will bring jobs to the local market.
Saudisation
However, there are challenges too, one of which is the Saudization policy (which is similar to national workforce programmes in other GCC states). Manufacturing companies in Saudi must employ a minimum number of Saudi nationals. These quotas vary depending on company size and increase over time. In addition, specific roles such as heads of human resources and private security guards are reserved for Saudi nationals. As part of the process, the Ministry of Human Resources and Social Development has introduced the Nitaqat programme which is a colour-coded system that categorises companies based on their percentage of Saudisation. The lowest category is Red, there are then three Green categories (low, medium, and high), and the highest category is Platinum. Companies in the Red category are unable to obtain visas and residence permits for foreign employees and their access to certain services is suspended.
Those in the Platinum category receive benefits. In its first year a small manufacturing company, (with six to 49 employees) must have a minimum Saudisation percentage of around 11% to be classed Low Green and a 28% Saudisation level to be in the Platinum category. A manufacturing company with over 3,000 employees would need a minimum Saudisation level of around 21% to be Low Green and a level around 40.5% to be Platinum. The main concern for manufacturing companies is encouraging Saudi nationals to take on manufacturing jobs which have traditionally been filled by non-Saudi employees. As a result, this sector has the lowest Saudisation percentage of all industries. Employers in the manufacturing sector must also provide incentives to retain talent in managerial roles and in this respect can end up competing with competitors or the public sector.
Government help
A number of helpful programmes have been launched in Saudi Arabia to help manufacturing companies. Although the focus on higher level education remains, Saudi authorities are also recognising the need for technical and vocational training to develop a Saudi national workforce which is able to take on roles in manufacturing and industry. This has led to the development of the Technical and Vocational Training Corporation which is a Government agency that specialises in providing vocational and technical training to Saudi nationals. In 2021, there were over 45,000 trainees in private sector training programmes and over 220,000 enrolled in technical colleges. The Human Resources Development Fund has also launched a host of subsidy programmes to help the private sector with Saudisation and boost numbers of women in the workforce. It subsidises 15% of a Saudi male employee’s salary and 20% of a female employee’s. Subsidies are also available for part-time employees.
This can help manufacturing companies offer higher salaries to attract Saudi talent to the sector and help companies meet Saudisation requirements. Meanwhile the Tamheer programme offers recent graduates with a bachelor’s degree the opportunity to do three to six months practical training with a private sector company and receive a salary of up to 3,000 Riyals a month from this Government programme. This helps trainees gain full-time employment and introduces employers to fresh talent to help them meet Saudisation requirements.
Authored by: Anas Akel*
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